EVAN HOROWITZ | QUICK STUDY
Alex Wong/Getty Images
Even as House Republicans continue to fiddle with their tax plan, the Senate unveiled its own proposal Thursday, complete with differing priorities.
Details are still emerging, but the basic contours of the Senate bill seem to match the House version. Both would cut the corporate tax, dramatically reduce the estate tax, give middle-class families a larger child tax credit — and generally pursue a trickle-down approach aimed at helping middle-class Americans by helping businesses first.
Look closer, however, and the broad similarities crack into myriad differences. Notably, the Senate plan preserves the current — and very popular — mortgage interest deduction, while doing away with the writeoff for state and local taxes.
But the biggest question remains unanswered: Can this bill meet the Senate requirement that the deficit be wholly unaffected after 10 years?
To understand exactly what’s in the Senate bill, and how it differs from the House version, let’s take it in four parts: business taxes, individual taxes, offsetting revenue, and even more offsetting revenue.
At the heart of both proposals is a massive cut to the corporate tax rate, from 35 to 20 percent. The House wants to implement this cut next year, but the Senate would hold off until 2019, as a way to reduce the short-term hit to government revenue.
A potentially bigger fight might be brewing over how to stop US companies from avoiding taxes by shifting work overseas.
Both the House and Senate want to move to what’s called a territorial tax system, where businesses only pay taxes on their US profits, not everything they earn around the globe. That’s the norm for most countries, but it requires smart regulations to ensure that companies don’t tweak their books to make it look like all their earnings come from abroad.
When the House released its plan for a 20 percent excise tax on businesses that move goods or profits to foreign subsidiaries, the pushback was intense. So the Senate is taking a different tack, with a special tax on overseas intellectual property — like patents or copyrights — that are often the source of tax-evading accounting tricks.
Gone from the Senate bill is the push to simplify the tax code by reducing the number of individual brackets. Senate Republicans are sticking with a seven-bracket system — as opposed to the House’s four — with several reduced rates including a slightly lower top rate of 38.5 percent.
Also missing is the House’s temporary $300 per person credit, which was meant to give a short-term boost to middle-class families. The Senate’s child tax credit, however, is slightly larger: $1,650 instead of $1,600.
And reports suggest that the Senate will not repeal the estate tax, as the House would like. Instead it will raise the threshold, so that the tax only applies to estates valued at more than $11 million.
Republicans in both chambers have pledged not to increase the deficit by more than $1.5 trillion over the next 10 years. And since their proposed tax cuts cost more than that, some counterbalancing tax increases are required.
The House managed this feat by tweaking a range of popular and sometimes very small-bore tax breaks. This included caps for the property tax and mortgage interest deductions, along with the outright elimination of deductions for people with extremely high medical bills and folks paying off student debt.
By contrast, the Senate seems to be focusing on a smaller number of more lucrative changes, chief among them a wholesale repeal of the deduction for state and local taxes. That would be particularly costly for high earners in blue states like New York and Massachusetts — not to mention that it could complicate negotiations later on because it has already proved unpopular in the House.
It’s possible — though still unproven — that the Senate bill will clear the first budgetary hurdle, limiting deficits to $1.5 trillion over the first 10 years. But that’s the easy part.
To move forward in the Senate, the bill also has to meet a second challenge. It must be completely deficit-neutral over the long term, adding $0 to the deficit in years 11 through forever.
Right now, there doesn't seem to be any mechanism in the bill to accomplish that, no cost-cutting change set to kick in after the first decade.
Still, even on the Republicans’ accelerated schedule there is time yet for a hundred indecisions and revisions as the House and Senate now begin to tussle — publicly and privately — over how best to limit the deficit, stoke the economy, and produce a final bill that can pass both chambers.
Dushku says she was written off the show “Bull” after she spoke up about misconduct on the set. The settlement came to light after CBS’s chief resigned when he was accused of harassment.Continue reading »
The area has struggled in the trophy class of tech expansions, the new campuses with thousands of jobs.Continue reading »
Save the Children Federation said it was the victim of a $1 million cyberscam last year.Continue reading »
Millennium Partners and a team of developers it’s leading received a green light Thursday to turn a Chinatown parking lot into a high-rise full of affordable housing.Continue reading »
Boston aims to strike a balance as major development plans for Suffolk Downs move forward.Continue reading »
Just five cities in Massachusetts accounted for nearly half the home loans to black families in 2015.Continue reading »
Mark Kempic will be chief operating officer of Columbia Gas of Massachusetts and see out the final work restoring service in the Merrimack Valley following the Sept. 13 disaster.Continue reading »
As the supply of discarded newsprint falls, UltraCell is turning to cardboard as a source of cellulose for home insulation.Continue reading »
Viewers in the US did not buy the hype of 3-D TV, and now the eye-popping format is seen as an expensive flop.Continue reading »